Hope Springs Eternal (in Programmatic)
Thank you all for the feedback to my weekly Marketplace Pulse update. We are getting great suggestions, but most importantly, it’s just been nice to hear from so many of you. One of the things I miss most since shifting to WFH is spending time with our Buyers and Publishers around the world. I spent a fair amount of time on a plane visiting our offices and meeting with our partners in each market. Being grounded has been an adjustment, but hearing from all of you has been great – even if it’s just to say ‘hi’. I really appreciate it!
Though we have focused on the US market in past newsletters, COVID-19’s impact is global. We have received a lot of requests to expand our view to international markets. As a result, we will take a look at European markets this week, in addition to our regular perspectives.
Stay safe, happy and healthy.
EVP, Global Marketplace Development
Tom Hanks continues to be our guide. He was Hollywood’s patient zero, heightening the urgency of COVID-19 seemingly overnight. Thankfully he recovered, and is reminding the world there is a Tomorrow.
The Business (helping us work from home better) and Media (Netflix, Disney+, et al) categories continue to perform best relative to the overall field.
While digital newfronts are being pushed out until later in the year, TV upfronts still happened with only travel brands largely sitting out. What does that mean? Many Buyers are simply stuck with their TV commitments, regardless of whether they have time and the capability to retool their messaging. It also means digital and programmatic were the first and easiest cuts to make. It’s likely that, while we took the hit first, we are in a prime position to recover quicker (think of a V instead of U). TV will have the opposite problem. As consumer behavior shifts abruptly, TV feels increasingly less flexible, while programmatic is more dynamic, responsive, and appropriate for the current environment.
Walled Gardens Prepare for a Drought
SMBs have been devastated by the pandemic. I mused in a prior newsletter that the Walled Gardens were going to feel the impact of this more so than the rest of programmatic. Historically, SMBs have not been as large of a player (mostly due to complexity of platforms and minimum spend requirements) in our neck of the woods. As it turns out, that is probably the case:
I am also hearing CPMs across the gardens have fallen dramatically as a result. Millions of businesses are great for not just driving Ad Spend, but also liquidity, in turn driving up CPMs. When they press pause, so does the bid density they represent. While bid density is not well understood outside of the supply space, this is a massive hit to revenue generation.
This is one of the bigger opportunities for local and national Publishers to consider. How can you make programmatic more enticing for local advertisers when they come back? Not just from a rates perspective, but operationally? Walled Gardens destroyed classified and other local sources of revenue, but there are opportunities to bring this back as a meaningful spender when local businesses come back online. There are a few DSPs that specialize in this space, and it’s entirely possible that even more will spot the opportunity and focus in. Simple workflow is key.
As we head into the second half of the month, we are seeing week-on-week increases across a handful of major verticals. The market is stabilizing albeit lower than we would all like. While CPG took some hits, it has been fairly resilient and is slowly starting to come back. As one of the largest categories for demand on the exchange, this is a good sign. We will continue to work our way through the flatness, but these are encouraging signs happening earlier than I would have anticipated.
There is still money in the banana stand, folks.
We are going to zoom in on a few verticals in European markets to help delineate some of the more interesting market effects from Covid-19. I am not sure if there is a European equivalent to Tom Hanks. Idris Elba?
Government campaigns are starting to fill a gap left by other Marketers. To be clear – this isn’t exclusive to Europe. We’re seeing the same in the US. Part economic stimulus and part public information, these paid PSAs are proving helpful in a few dimensions. They are distributing needed information to help keep the public safe and informed, and funding Publishers when they need it the most. While there was a noticeable dip in the first week of the quarter, it’s starting to pick back up, presumably with retooled, COVID-19 appropriate messaging and programs.
The pull back in this category is global, and it’s real. It is also more pronounced globally than in the US. Until folks can physically purchase a new car, this will probably flat line for the entire quarter. The blip in the UK at the end of March is more than likely just quarterly budgets being flushed out. This also presents an opportunity for innovation. If car lots remain vacant spaces for an extended period of time, do major manufacturers invest in newer, virtual showrooms, test drives, and buying paths? The first to get this right and to scale could end up capturing significant market share. I expect there are a few war rooms running this very second to assess (Elon Musk probably has a hologram showroom ready to go by end of the quarter). Leases are still expiring, and people will still need cars. This could end up creating permanent behavior changes in the category if widespread consumer acceptance is achieved. Imagine a tracking pixel firing on a new vehicle purchase for the first time #attributiongold. Will cars go the way of mattresses? Extended trial periods? If you will buy a mattress sight unseen how far fetched is it to buy a car the same way?
To be clear – this is PUBLISHERS BUYING ADS not the ad spend publishers are seeing. They are hustling to grab attention during the height of lockdowns. These budgets are opportunistic and volatile. Subscription services are needed to fill the gap in revenue on the ad side.
I believe the lack of stability on one side is creating effects on the other but in ways that I am not sure I know how to quantify yet.
As discussed in previous newsletters, Keyword Blocking (coronavirus, COVID-19, etc.) is a problem all around the globe. The relative ease in which Marketers can abstain from advertising alongside any remotely controversial topics is having disastrous impacts on Publishers. We need their content now more than ever, but it’s never been harder for them to fund it. I cannot stress enough how much value there is in this category for Buyers — particularly for Marketers who have retooled and returned to the market with COVID-appropriate creative and messaging.
I am also hearing publications like the Financial Times are seeing a surge in subscriptions as the populace tries to grapple with the larger economic uncertainties caused by COVID-19.
There are similar trends in most European markets. CPG is largely resilient as a category, but there were some challenges as we rounded out the end of the quarter. The large spike in Italy in March was largely driven by cleaning and sanitization products.
I will keep this short as we covered a lot in this newsletter. Here are a few key takeaways:
- Programmatic trends look very similar across global markets.
- We are the more adaptable, agile channel. We therefore felt it harder, faster – but we may end up recovering faster for the exact same reason on the other side.
- Spend is starting to stabilize and grow from its previous lows, albeit slowly.
I believe we will continue to read more about layoffs, furloughs, and salary reductions in the coming weeks, but don’t conflate necessary cost-cutting and money-saving moves with an industry in peril. It hurts now, but we are in a great place for the turnaround. As someone much smarter than me has said, and in regards to something much more important than ad spend:
“Now this is not the end. It is not even the beginning of the end.
But it is, perhaps, the end of the beginning.”